Western Washington housing market still strong, but some see signs of rebalancing
KIRKLAND, Washington (Oct. 5, 2016) - It's still a seller's market, but some leaders from Northwest Multiple Listing Service think the imbalance may be easing in some areas, pointing to a slower pace of sales and moderating prices. Others aren't convinced, citing mixed indicators.
Northwest MLS statistics summarizing September activity show year-over-year gains in the volumes of new listings (up 14.5%), pending sales (up 9.3%), closed sales (up 9.5%), and prices (up nearly 9%). Inventory for single family homes and condominiums across the 23 counties in the report dropped about 8 percent from a year ago.
Commenting on September's activity, Northwest MLS director George Moorhead reported "rumblings on both sides of the fence" by buyers and sellers. "Buyers are getting antsy to make a move before interest rates rise and they're looking harder at homes that have been on the market longer than 30 days."
Sellers are considering remodeling instead of buying as they cannot find a suitable new home, according to Moorhead, the designated broker at Bentley Properties. He noted builders also face challenges in their searches for new development sites near metro areas.
MLS members continue to scramble to replenish inventory. Compared to a year ago, they added 1,275 more new listings during September, ending the month with 10,047 total new listings. Like most months this year, however, September's pending sales of single family homes and condos exceeded the number of new listings. Brokers reported 10,463 pending sales (mutually accepted offers) last month for a 9.3 percent improvement over a year ago.
September's new listings marked the lowest monthly total since February - but it may be an expected seasonal slowdown.
"We have one month until November when new listings coming on the market drop by 50 percent on a monthly basis compared to spring and summer months," explained J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. With the decrease typically lasting until the end of February, Scott said for selection, "the best opportunity for homebuyers to find a home will be in the next 30 days."
The current selection includes 18,136 active listings, down about 8 percent from the year-ago inventory. Only two counties - King and Clallam - reported year-over-year gains in inventory during September.
Area-wide supply, as measured by months of inventory, improved slightly from August, rising from about 1.9 months to 2 months. Supply remained below two months in King, Snohomish and Pierce counties.
Demand for homes around Puget Sound remains strong, with the market showing "no marked change throughout the summer months," remarked MLS director Dick Beeson, the principal managing broker at RE/MAX Professionals in Tacoma. Well-priced, well-conditioned homes continue to command attention and draw offers in record time, he noted.
September was "an interesting month for a few different reasons," noted OB Jacobi, president of Windermere Real Estate. Among factors he cited were the modest increase in the number of new listings in the tri-county region (King, Pierce, and Snohomish) and the slowing pace of sales and prices. "The good news is that all of this points towards a market that is slowly beginning to rebalance itself."
"The increase in listings is pretty unusual given that the number of listings usually declines between August and September," Jacobi commented, adding, "Considering how desperate we are for inventory, I hope this trend continues as we head further into the fall months."
MLS director Frank Wilson believes Kitsap County is moving into the fall cycle, evidenced in part by slowdowns in listings and sales when compared to mid-year activity. He also reported fewer people at open houses and fewer multiple offer situations. "We are still heavily weighted to a seller's market, but a small shift might be telling - we're seeing more price reductions than in the recent past," said Wilson, the branch managing broker and Kitsap District manager for John L. Scott Real Estate in Poulsbo.
Sparse inventory in many close-in neighborhoods, a shortage of appraisers, and the likelihood of an interest rate hike before year-end are sources of concern, according to some MLS spokespersons.
"We continue to see a seller's market expansion in peripheral counties, with absorption remaining high and prices continuing their relentless increases," said Mike Grady, president and COO at Coldwell Banker Bain. Additionally, he cited reports on healthy job creation and single-family building permits, and increases in investments in the local market by foreign buyers. "We don't expect things to moderate significantly any time soon," he remarked.
A shortage of real estate appraisers is concerning to Grady and other MLS officials. "We are hearing concerns from brokers that closing times are increasing because appraisals are more difficult to get completed in a timely manner given the frenzied pace of activity," Grady stated, adding, how rush fees can also slow down the process for those not paying a premium for expedited service.
"With the current shortage of appraisers and the lengthened time and increased costs it takes to get an appraisal, this market is even more challenging," said Wilson. "We've gone from reductions in closing time over the past 20 years to now lengthening the process because of changes to our industry and the requirements to be an appraiser."
Beeson agreed, saying "Appraisals continue to plague brokers and sellers." The number of certified appraisers statewide has diminished by half from 5,000 to around 2,500 since Dodd/Frank regulations took effect. Longer appraisal time isn't the only challenge, he noted. "Appraisers are struggling to establish values based on the continued rise in sales prices. Many buyers are faced with the prospect of paying above appraised values if they want to secure a home," according to Beeson, who noted this difference must be paid in cash so the mortgage amount doesn't exceed the valuation.
Median sales prices system-wide jumped nearly 9 percent from a year ago, from $312,000 to $340,000. Compared to August, prices dropped by $10,000.
"It is normal for median home prices to fluctuate the second half of the year," stated Lennox Scott. He noted the median home price for single family homes that sold in King County dropped from $550,000 in August to $538,000 for September. Compared to 12 months ago, the countywide median rose 9.7 percent for single family homes and 16.4 percent for condos.
Condo prices area-wide rose 17.3 percent from a year ago, escalating from $260,000 to $305,000. Supplies are tight, with only 1.3 months of inventory. In King County, where last month's median sales price was $355,000, there is only one month of supply. Similarly, Snohomish County has only a month of inventory; year-over-year prices there rose nearly 9.8 percent.
"We have had many conversations with sellers who wonder if they have missed the market as inventory levels slowly rise and the Feds signaling a desire to raise interest rates in December," remarked Moorhead.
"The looming prospect of higher interest rates is fueling buyer interest and prompting many buyers to take the plunge now rather than wait for a reset in prices," reported Beeson. "Knowledgeable brokers coach buyers that a 1% change in interest rates equates to a $200-plus increase in monthly payments on a $400,000 home and more than $160 a month on a $275,000 home. That means property values would have to decrease by over 12% to balance the increase in payment due to higher interest rates. That's not happening anytime soon," he stated.
In a recent report on actions consumers can take in anticipation of rising interest rates, Bankrate, an aggregator of financial rate information, suggested "considering your home first." On a $200,000 mortgage, half of one percentage point of interest means a difference of $20,000 or more over 30 years. "If you are on the fence about buying or refinancing, now is the time to act," the author of the Bankrate report wrote.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of nearly 2,100 member offices includes more than 25,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in Washington state.
Statistical Summary By Counties
Market Activity Summary and 4-County Puget Sound Region Pending Sales (PDF)